How a Jumbo Home Loan Can Help You Supersize Your Home to Fit Your Growing Family

Maybe you have a new baby on the way. Perhaps you adopted a child. It could be that you have an aging parent who will be moving in with you. There are plenty of reasons why your household size may be growing. Whatever the impetus, when your family does grow,  it’s nice if you can increase the size of your home too.

As you’d expect, larger homes often come with a larger price tag. Of course, the old adage of “location, location, location” impacts a home’s price too. So even a moderately sized home can cost quite a bit more if it’s in a highly desirable area, especially if the schools are well known for having great test scores or exceptional resources for kids.

What does all of this mean to you? When it comes to moving up to a larger home, building a dream home or moving into a more desirable neighborhood, instead of applying for a conventional loan, you may need to apply for a jumbo loan mortgage (a loan amount above the conventional loan limits).

What qualifies as a jumbo mortgage loan? Read on and we will explain.

What Is the Difference Between a Conventional Loan and a Jumbo Loan?

The primary difference between a conventional loan and a jumbo loan is the amount of money you will be borrowing. This is not to be confused with the cost of the house you will be buying, it is solely driven by the loan amount you are borrowing at closing.

For example, you could be purchasing a $1 million home, but if you’re putting $800,000 toward the down payment, then you’re only financing $200,000. That’s not a jumbo loan amount. Whereas, purchasing the same home but only putting down $150,000 and financing $850,000 would be considered a jumbo loan amount.

What is the loan limit for jumbo mortgages? The actual amount is determined by the Federal Housing Finance Agency (FHFA). More accurately, the cap is set based on how large of a loan the investors (primarily Fannie Mae and Freddie Mac) will insure. The loans they insure are referred to as conventional conforming loans because they conform with Freddie and Fannie standards. Anything beyond their insurable amount becomes a jumbo loan or a non-qualified mortgage.

The amount that defines the conforming loan limit changes from year to year. It depends on whether home values are trending up or down. Also, because property values can vary dramatically from city to city, the amount that qualifies as a jumbo loan also depends on where the home is located; there are some areas considered “high-cost” areas where the limits may be higher. Worth noting, the limits are also not the same for homes that have more than one-unit such as  a duplex.

So, let’s establish some jumbo loan basics for 2025.

In most areas of the country, jumbo loans begin at $806,500. For areas of the country with higher property costs, jumbo loans begin at $1,209,750.

Say you’re living in Averagetown, USA, and put $150,000 down on a $1 million home, you’ll need a jumbo loan. That’s because the $850,000 loan amount exceeds the single-unit loan limit.

Now take the same scenario in a high-value market, such as Washington D.C. There, you would use a conventional loan since the $850,000 is less than than the high-cost, one-unit jumbo loan limit.

Why Is a Jumbo Loan a Non-Conforming Loan?

You may have heard of a jumbo loan also being called a non-conforming loan. How come? The Housing and Economic Recovery Act of 2008 set guidelines for “conforming” loans. This was to protect lenders and investors from risk of homes defaulting. As we mentioned earlier, Freddie Mac and Fannie Mae only back conforming loans. This means lenders or outside investors are on the hook for a jumbo loan if the borrower defaults on payments. Because the lender is accepting all risk on jumbo or non-conforming loans, the maximum amount they will give you is up to them and the guidelines also may be more restrictive than a typical conforming, conventional loan.

What Are Jumbo Loan Requirements?

Because there is greater risk involved for the lender, a jumbo loan is harder to get approved for than a conforming loan. When applying for a jumbo loan, each lender and investor will have its own set of guidelines and checklists for approval. However, you can anticipate that most programs will require you to have:

• A good credit score of 700 or above.
• Cash reserves in bank or investment account of 3-6 months.
• A down payment between 15 and 30% depending on loan amount and residence type.
• An additional appraisal may be needed to confirm the home’s value and support your requested amount.
• Additional closing costs or fees could also be assessed to your loan program

You might also be asking, do jumbo loans require private mortgage insurance(PMI)? The answer is it could but in most cases they do not have monthly PMI, instead the risk is considered in the rate offering.  Since each program is unique, it is a great idea to connect with a local loan officer to find out more.

Find the Best Jumbo Loan Rates and Advice

The road to a purchasing or building a larger home can come with unexpected challenges. Navigating your jumbo loan options and decisions is easier when you have a guide. By working with a personal loan officer, you’ll have help avoiding the most common mistakes, misunderstandings, and setbacks. Your personal loan officer will help you qualify for a jumbo loan, shop for the lowest interest rate, and even discuss if alternative loan structures are a better option than a jumbo loan. Ultimately, your personal loan officer will help you outline a path to get the home your family needs with the best terms and fewest challenges possible.

Want to get started now? Complete our Quick Start Form and we’ll connect you with a loan officer that matches your specific needs. They’ll provide a free consultation and guide you through every step of the loan application process.